A perspective on growth

Prof. Rishikesha T. Krishnan, IIM Bangalore speaks about what Strategic Management has to say about growth.

There are three different dimensions to growth opportiunities, first is the Mindset, second is Strategy and he third dimension is the Operating Mechanism.

 

It is important to think in a growth oriented way, if you define the market narrowly then you miss out opportunities. For example, look at Coke, they have a good share in the soft drink segment, but if you consider the share of all drinks and beverages people consume or if you look at the total "Throat Share", then their share is very small. So in an attempt to increase the Throat share many of the soft drink companies are now focusing on bottled water and fruit juices and other beverages.

While people obviously like growth as it motivates and excites, and gives opportunity to have new people in the company, many times it may not be profitable to grow. Growth should also result in profitability comparable in that particular segment. Hence it is important to look at the value chain, and focus on areas where you can earn a profit, and have a unique offer which has a competitive advantage.

Every business is a growth business, it really is a question of identifying it, understanding that every market has unmet needs and that there are under served markets and focusing on it.

If you look at recession in the western market, they are under pressure to control costs. If a company from India has a value proposition to offer, and can provide the same service at a better cost, then it is a business proposition.

In large companies, the issue in pursuing growth are the people who control the resources , they don't want to invest money in new unproven ideas nor take chances about businesses they don't know about, in short they are not willing to experiment. There is also inertia. Successful growth companies overcome this inertia and create mechanisms to foster business development over the long term.

To create growth culture within your organisation, establish an explicit and visible growth portfolio. Insulate the new venture from rest of the organisation which may beat it down. Build growth into the company's DNA. Encourage out of the box thinking. If you are the owner of business, don't depend only on your own ideas, encourage brainstorming within the team to generate new business ideas, be open to adopt an idea. The customer interfacing people may understand an unmet requirement and provide the much required idea.

What are the different ways in which you can grow, you can look at existing products or new products. Look at the markets you are already serving or look at new markets. Look at better traction from your existing products in the existing markets. You may come across barriers where you are unable to displace your big competitors, then you take existing products and look for new geographies, or take new products and look at existing customers. Leveraging on existing skill sets, existing relationships, competencies and knowledge is the most sensible thing to do. Growth is a mentality created by the company leadership. Have your front-line people help you get additional business.

To sum up sources of growth

* Natural growth process which happens when the market expands.

* Market share grows through reduced cost and increased productivity hence better volumes of production.

* If you have a Proprietary or patented technology that gets you protected position in the market.

* Exploiting your already existing distribution channels.

* Look at Opening new markets

* Gaining power in the market place

* Expanding your pond.

* Re-segmenting your markets

* Moving into adjacent segments of the other markets.

One more way of looking at growth is to look for all unoccupied spaces, either in a stage of buyer experience that you want to enter or a Utility or Benefit you are planning to provide.Look at the entire life-cycle of the Customer ownership of a product for an opportunity. Right from Purchase, Delivery, Usage, Maintenance and finally Disposal, at each stage you have an opportunity to add value.

There are a whole lot of dimensions you need to look at before you introduce a new product or a service viz: Customer productivity, simplicity of use, environment friendliness the fun and image of ownership, convenience and the risk involved in owning the product of service. For example, what Coffee Day has done in the fast food / coffee & Tea segment is that they provided an experience. They looked at the buying cycle, especially at the purchase, delivery and Use of Coffee and Tea and redefined the way you looked at the experience. They have created a Utility and provided an Ambiance for fun and music where people want to get together.

Let us look at strategies for disruptive growth businesses, relevant to our country. Can we really create a new market with disruption; see if there are any products/services which people are not using due to cost or complexity of use. For e.g. The sachets of Shampoo, people were using soap or some alternative as the cost of purchasing a jar of Shampoo was high, till they got a good alternative within their capacity.

How do you know if you have a really disruptive idea? Ask yourselves; look for customers who did not buy due to lack of money / skills to use the product. Second question, is it targeted at customers who like a simple product. If the prevalent product over serves the customer, or if you bring down cost by removing unwanted features, will your product sell better.

Look at a different business model, the retail giant Walmart reduced overheads, brought down margins, but looked at volumes and quick sales to enhance stock turns to get the kind of bottom line they were looking for.

There is no such thing as a mature business, provided you can look beyond traditional Definitions of industries and markets. Let me conclude with a statement that Growing is less risky than not growing!

Rishikesha T. Krishnan is a Professor of Corporate Strategy & Policy at IIM Bangalore. His research interests are in strategy, innovation, and competitiveness. He has done studies at the firm, industry, and national levels related to innovation.

He has been a member of the Confederation of Indian Industry (CII) National Panel on Intellectual Property, R&D, Technology and Innovation, the Advisory Council of CII's National Innovation Mission & on the jury of Nasscom's innovation awards.  

He was speaking at a Panel Discussion organized by Businessgyan and TASMAC  on the topic ‘How to grow in turbulent times?'

Compiled by Ms. Mangal D Karnad for Businessgyan

Issue BG85 Apr 08